Globalization of Business and Inventory Valuation Policy

1. The globalization of business activity has resulted in which of the following?
a. Increased corruption and unethical behaviour.
b. FASB and IASB working jointly on a project to converge accounting standards.
c. The requirement that major Canadian companies use International Financial Reporting Standards as of January 1, 2011.
d. All of the above.
e. b and c.

2. Which statement best describes the retained earnings account?
a. The retained earnings account is equal to the cash account less dividends paid.
b. Retained earnings are funds a company has chosen to reinvest in the operations of a business rather than pay out to stockholders in dividends.
c. Retained earnings represent unused cash of the firm.
d. The retained earnings account is the measurement of all distributed earnings.

3. The inventory valuation policy chosen by a particular company assumes a flow of goods that need not have anything to do with the actual order in which its products are sold. (True/false)

4. Using FIFO during a period of inflation would result in net income being overstated relative to the LIFO method. (True/false)

5. Assume a company accounts for an investment in shares of another company using the equity method. Because the investor can control when and in what amount the investees' dividends are paid, the amount of cash received by the investor as dividends is generally the same as its share of the income reported by the investee each year. (True/false)

6. A change in short-term investments from one balance sheet to the next affects cash. (True/false)

7. If a firm is using financial leverage successfully what would be the impact of doubling operating earnings?
a. The return on equity will double.
b. The return on equity will increase, but not double.
c. The return on equity will more than double.
d. The return on equity will decline by half.
e. None of the above.

8. Management accounting can play a critical role in the service industry because of all the following reasons EXCEPT:
a. firms must be especially sensitive to the timeliness and quality of customer service.
b. many employees have very little contact with customers.
c. customers immediately notice defects and a delay in service.
d. dissatisfied customers may never return.

9. In a management accounting context, "different costs for different purposes" means
a. external users of accounting information require information that can vary by industry.
b. management requires information that reflects varying decision-making needs.
c. that there is no universal way to compute the cost of something,
d. All of the above
e. Only b and c.

10. Which of the following is NOT a feature or objective of total-life-cycle costing?
a. Since 80% of a product's total life costs are committed in the research, development, and engineering cycle, it enables cost savings in manufacturing and post-manufacturing activities.
b. It is a process to manage costs within market research, product design, and product development.
c. For most products, the majority of the product's total life costs are incurred during the post-sale service and disposal cycle.
d. A breakdown of costs for each stage of the Total Life Cycle will differ, depending on the industry and specific products produced.

11. A challenge with the Balanced Scorecard is to
a. find the right mix of financial and non financial measure to perform multiple tasks.
b. identify appropriate remedial actions to be taken when performance falls short.
c. identify performance measures that align with the company's strategy.
d. communicate the company's strategic objectives.

12. Which of the following management tools are used in the manufacturing cycle of the value chain?
a. Target costing.
b. Kaizen Costing.
c. Total-Life-Cycle Costing.
d. All of the above.
e. b and c.

answers are below

1. The globalization of business activity has resulted in which of the following?

Answer E. B and c.

2. Which statement best describes the retained earnings account?

Answer b. Retained earnings are funds a company has chosen to reinvest in the operations of a business rather than pay out to stockholders in dividends.

3. The inventory valuation policy chosen by a particular company assumes a flow of goods that need not have anything to do with the actual order in which its products are sold.
Answer False

4. Using FIFO during a period of inflation would result in net income being overstated relative to the LIFO method.
Answer True

5. Assume a company accounts for an investment in shares of another company using the equity method. Because the investor can control when and in what amount the investees' dividends are paid, the amount of cash received by the investor as dividends is generally the same as its share of the income reported by the investee each year.
Answer True

6. A change in short-term investments from one balance sheet to the next affects cash.
Answer True

7. If a firm is using financial leverage successfully what would be the impact of doubling operating earnings?

Answer c. The return on equity will more than double.

8. Management accounting can play a critical role in the service industry because of all the following reasons EXCEPT:

Answer b. many employees have very little contact with customers.

9. in a management accounting context, "different costs for different purposes" means

10. Which of the following is NOT a feature or objective of total-life-cycle costing?

Answer d. A breakdown of costs for each stage of the Total Life Cycle will differ, depending on the industry and specific products produced.

11. A challenge with the Balanced Scorecard is to

Answer A. fine the right mix of financial and non financial measure to perform multiple tasks.

12. Which of the following management tools are used in the manufacturing cycle of the value chain?

Answer a. Target costing.

Solution Preview

Correct answers with reasoning:

1. The globalization of business activity has resulted in which of the following?

Answer E. b and c.
Correct
Reasoning:
The globalization of business activity is not the cause for increased corruption and unethical behavior and hence options a) and d) are incorrect.
FASB and IASB working jointly on a project to converge accounting standards and hence option b) is correct.
It is also true that major Canadian companies use International Financial Reporting Standards as of January 1, 2011. Hence, option c) is also correct.
Therefore, option e) which says b) and c) are correct is the correct option.

2. Which statement best describes the retained earnings account?

Answer b. Retained earnings are funds a company has chosen to reinvest in the operations of a business rather than pay out to stockholders in dividends.
Correct.
Reasoning:
Retained earnings is not cash less dividends paid and hence option a) is incorrect.
Retained earnings represent the accumulated earnings that the company has chosen to reinvest and hence option b) is correct.
It does not represent unused cash of a firm or measures distributed earnings and hence c) and d) are incorrect.

3. The inventory valuation policy chosen by a particular company assumes a flow of goods that need not have anything to do with the actual order in which its products are sold.
Answer True
Reasoning: Assumption of flow of goods of inventory is for accounting purposes ...

Solution Summary

The solution discusses the globalization of business and inventory valuation policy.